One of the primary assumptions in the solar industry is: “if the cost of something gets low enough, everyone will automatically buy it.” In my mind there is no guarantee that solar power will become mainstream when it costs approximately the same, or even less than conventional sources.
Here’s why. Even with lower and lower cost per watt, solar power is missing two key elements of market expansion: product intangibles and a compelling reason to buy.
Consider what happened with the personal computer (PC). Not only did prices go down (and performance went up) but MANY other things helped make the PC a mainstream appliance. One of the biggest factors was the addition of IBM’s backing and reputation to the desktop computing industry. Some readers may remember the so-called “IBM compatible PC” standard. IBM’s blessing along with other “standards” such as the ISA/EISA bus combined to reduce the perceived risk of buying a PC. Adherence to industry standards is called a “product intangible.”
Every single manufacturer of personal computers made and sold an IBM-compatible version of their PC. And by adding that intangible attribute to their product, they immediately became trustworthy in the eyes of the consumer.
But the most powerful factor in PC market development was a compelling application called the spreadsheet. Early spreadsheet software (Lotus 1-2-3 and Context MBA) running on the PC provided a quantum leap in capability over the existing ways of manipulating numbers…with adding machines, calculators, pens, pencils and sheets of paper.
The Green Banana Problem
Selling green bananas is different than selling yellow bananas. The promise that someday a green banana will turn yellow is a fairly weak value proposition.
This green banana problem also applies to solar. A common counterpoint in the debate about grid parity is that solar provides two very compelling “future” benefits: long-term price certainty (or less price volatility), and greater environmental health or sustainability. While these future benefits are certainly true and evident, they just aren’t compelling enough to drive market expansion. People want yellow bananas (a.k.a. immediate satisfaction).
So in the solar industry, there are few if any risk-lowering product intangibles (who’s the IBM of solar?) and the compelling “immediate” reason to buy hasn’t been sufficiently articulated yet. Which means when solar reaches grid parity, it will provide something that people already get from a utility…electric power for the same price. There’s no immediate advantage in capability above what a utility already offers. Plus, it isn’t necessary to install a complex system on your roof when power comes from the grid.
Without risk-lowering standards or intangibles, and a compelling reason to buy, the solar industry must focus on vertical word-of-mouth referrals and references to overcome these missing elements of market expansion. Convincing mainstream buyers to adopt solar is certainly possible, but relying on grid parity is not the best technique.
Warren Schirtzinger advises solar companies on how to: differentiate their products, grow during an industry shakeout or consolidation, and thrive without government subsidies. He has authored articles as a “Renewable Energy Insider” on RenewableEnergyWorld.com and writes about marketing strategies on the solar strategies blog. Contact him via e-mail (warren
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